How Bangladesh can become more competitive

According to the recently published "Global Competitiveness Report (GCR) 2016-2017", Bangladesh is now ranked 106th among the 138 countries included in the survey. Our ranking jumped one notch since the previous year's report came out. We were in the 107th position last year, and 109th the year before. That's good news since progression is always better than retrogression. Not all countries have been able to accomplish that feat, and we only have to turn to China, Vietnam, and Brazil, which either declined or stagnated in the ratings to draw some comfort from our onward march. But what does it all mean, and how come we became more competitive and Vietnam did not? I discuss this because our national press has made a big deal since the publication of this report and to caution the powers that be to pause before we can rest on our laurels. 

Let me reiterate that according to Global Competitive Index, we have become more competitive in a year. Bangladesh can hope to be recognised in the near distant future for great infrastructure, business-friendly investment climate, and efficient bureaucratic levers, as well as for the availability of cheap and technically savvy labour force. However, it seems that we still have a long way to go if we read the fine print of GCR. According to the World Economic Forum (WEF), which funds this report, there is a positive correlation between GCI and per capita GDP, i.e. countries which are higher on the competiveness scale appear to have higher per capita income. Is there any causality here? Apparently so, argues the Switzerland based group. Greater competiveness generates greater investment and higher per capita income. In his new book, The Fourth Industrial Revolution, Professor Klaus Schwab, founder and Executive Chairman of WEF, argues that we are now going through a major change in the global economic system, and expresses fear that many of the world's economies might find themselves ill prepared for this change. Both GCR and GCI are based on the premise that there are twelve pillars that will provide support for the new industrial revolution, and these are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technologies readiness, market size, business sophistication, and innovation. These twelve factors are the forces driving productivity and prosperity in the global economy, and the competitiveness index is the weighted average of these pillars.

Now, why does competitiveness matter? First of all, from a policymaker's perspective, it gives us a clue as to how the investment climate is changing for the private sector. Secondly, the movement in GCI, the scores, and the global ranking provide a valuable signal to foreign investors that Bangladesh is open for business and it provides a safe environment for foreign investment. Just to take an example, if our infrastructure is crumbling and our macroeconomic stability is going downhill, it would be difficult for Nestle to consider Bangladesh seriously as a possible location for the next plant to manufacture Maggi noodles.Needless to point out that investment determines growth and employment, and we are in a way competing with India, Myanmar and Vietnam for the next tranche of Chinese surplus cash as it looks for safe and high returns. While Bangladesh has negotiated major deals with China in the wake of President Xi Jinping's visit, only a few months ago it was reported that one of China's most prominent developers, Dalian Wanda Group, signed a Memorandum of Understanding (MoU) earlier this year with the northern state of Haryana to develop 'Wanda Industrial New City'. Incidentally, India had jumped by 16 places to 39 in the GCI ranking!

If we look at the detailed report, we notice that Bangladesh moved up in some of the 12 categories and down in the others. Though infrastructure is said to have improved in Bangladesh, it still remains the major problematic factor for doing business in the country followed by corruption (or generally "Institutions") and lack of finance, according to the report. Let it be known that the Centre for Policy Development (CPD), which collaborated with WEF, has been critical of our lack of progress in some GCI areas, but it has not been vocal enough, in my opinion. To his credit, Dr. K.G. Moazzem of CPD did not mince words when he said at a press conference that besides power generation, transport infrastructure in Bangladesh via rail, road and waterways has not improved much."The government should gradually focus on efficiency enhancing factors along with ensuring basic requirements," he added. CPD's own research has shown that private investment as a percentage of GDP has been declining since the AL government took over, and productivity of capital has been going through a roller-coaster ride, but has generally declined over the same period. 

This is not to deny that according to a survey of business leaders, about 37.1 percent of all respondents indicated positive changes in the business environment in 2016, but the margin over those who thought otherwise was very narrow. It also transpires from the survey that this confidence is contingent on the government's ability to deliver on the promised services such as setting up of Special Economic Zones (SEZ), and better access to gas, energy and other infrastructure.

Another major issue, less tangible than infrastructure but nonetheless very much potent, is the lack of faith among our business executives in our institutions. GCI queried the respondents about property rights, ethics and corruption, undue influence, public-sector performance, and security. Respondents also ranked institutions in the private sector, and these include corporate ethics, ethical behaviour of firms, accountability, strength of auditing and reporting standards, efficacy of corporate boards, protection of minority shareholders' interests, and strength of investor protection. We rank very low in all these areas. 

In terms of our trust in the efficiency of legal framework in settling and efficiency of legal framework in challenging regulations, and transparency of government policymaking, we are in the lower rungs of the ladder, although it appears that since the last year, our score in the last category has improved. In terms of "irregular payments and bribes", we are #135, one of the last. Why are we not making progress on this front? At a recent forum in Boston, expatriates were asking the same question: how can we be sure we will receive a fair treatment when we apply for permits? Why do we still notice that our corruption level, in terms of amount needed to secure a permit, is going up every year and that licenses are harder to get unless you grease the palm or know someone in the corridors of power?

Two final points. We can, and ought to, use the index not as a black box, but to identify factors that impact our economic development and to raise our collective consciousness and critical thinking. For example, in the category of innovation, we are ranked 121st, but we rank much higher, 72nd, in terms of availability of scientists and engineers. So the puzzle that we need to solve is how come we have the skills but the "scientists and engineers" are not too innovative? Is that a reflection on the quality of our higher education system and the professional environment? 

Secondly, the report also sheds light on the performance of some of the key regulatory bodies and government institutions. I might sound like a broken record, but public debate is essential on the issues raised by this report. It's not only about the business climate but also about our identity and the opening up of the opportunity set for the average person.

The writer is an economist and writes on public policy issues.